Insider knowledge

Research highlights the importance of effective internal marketing within organisations

This article summarises research carried out during 2009 for a master's dissertation. Participants in the study included major pharmaceutical companies and it was striking to note the prevalence of a short-term sales approach, as opposed to a longer term strategic marketing orientation at senior management and board level.

Symptomatic of this result was the general finding that the intended overall strategy of a company was rarely translated into expected results.

A critical reason that emerged was a disconnect with key stakeholders in the communication of strategy. While many firms had internal communication functions, there was a lack of clarity about organisational fit and role.

The findings suggested that firms should embrace a broader marketing strategy and more specifically apply "marketing like activities" or tried and tested marketing tools to their internal stakeholder market so as to mirror the successful communication to external markets.

The paper recommends a strategic working model as a basis for a "trialogue" between internal stakeholders, a firm's board and external markets in the context of a company's strategy.

Background The current economic turmoil emphasises the need for a strong relationship between the company, its employees and customers. This points to the importance of improved and effective communications and understanding of the organisation's strategies and objectives across all stakeholder groups and, more particularly, internal stakeholders of the company.

Typically, firms deploy communication resources at external markets, usually at tremendous cost, while ignoring the internal needs and the broader employee community. Standard marketing tools may provide the basis in order to communicate swiftly and clearly the aims of the organisation down the hierarchical ladder.

Successful marketing efforts are reliant upon the ability of employees to adapt quickly to strategic and marketing changes. This requires high quality communication that informs employees as to the nature and importance of changes to the external environment. This can be deemed a typical marketing activity and generally requires companies to focus on customers and adopt a market orientation.

Many enterprises are persistently engaged in some type of change initiatives such as transformation-mergers, alliances, downsizing and rightsizing – generating the need for constant communication.

This phenomenon, accompanied by many other external pressures, increases the need for internal marketing. But there is a considerable knowledge gap about this management tool. A recent study published in Marketing Week showed that 85 per cent of companies did not have a human resources or marketing budget for internal communication let alone internal marketing.

Organisations continually push for progress to improve their competitive advantage within their respective sectors. The continuing challenge for them is to develop the strategy(s) to further enhance their competitive advantage through use of the business strategy, and how they might then communicate this to their employees – in effect treating employees in the same way as they would external customers.

Internal communication or internal marketing?Internal marketing views an organisation's employees as 'internal' customers. The concept of internal marketing emerged from the development of services marketing in the late 20th century. In particular, the literature suggests that internal marketing is a means of creating a sustainable competitive advantage in the marketplace through and with employees.

For the purposes of this article, internal marketing is defined as: '...a planned effort using a marketing-like approach directed at motivating employees for implementing and integrating organisational strategies towards customer orientation.' That is, internal marketing is seen as encompassing the efforts of the company to encourage employees to respond to the market, which includes being able to adapt quickly to (often unpredictable) changes in the external market.

While strong communication enables staff to understand business strategy, it is not enough to guarantee success in external marketing activities. Instead, the impetus for staff actually to respond and be involved in business strategy needs to be generated from within, and be part of the internal marketing culture of the organisation. Therefore a structured internal marketing strategy as opposed to merely a communication strategy is required. More specifically, staff must be encouraged to have a 'need' to contribute individual effort to the firm on a discretionary basis beyond the requirement of their job functions.

ResearchThe initial research question investigated whether employee engagement is considered before designing marketing strategies, and what internal marketing and relationship marketing can generate for an organisation in terms of sustainable competitive advantage. It is beyond the scope of this article to detail the research design and methodology employed to investigate internal marketing as a critical success factor. Suffice to say a case study driven approach was followed utilising a qualitative approach across seven firms.

Respondents were targeted at board level of seven different organisations using a convenience sampling strategy. Semi-structured interviews were carried out over a four-week period to collect the data. Common themes were identified and represented using descriptive statistical techniques collated into a series of web diagrams and tabulated in an importance and performance matrix to represent the data.

Strategy and structureFor any successful business it is essential for the board to broaden its definition of markets for inclusion in its strategic market definition. Christopher, Payne and Ballantyne (1991) from Cranfield University identify six markets which they claim are central to marketing: internal markets, supplier markets, recruitment markets, referral markets, influencer markets and customer markets.

Our research indicated very low awareness of the range of stakeholder markets and indeed, firms tended to focus exclusively on customer markets in their formal strategies. However companies acknowledged the need for a wider ranging structured approach and more specifically the incorporation of internal market planning in formal strategic planning.

Respondents agreed that standard "marketing like" activities such as segmentation, target marketing and tailored messages through an appropriate marketing mix to the internal market would enhance the discretionary efforts of staff beyond threshold work levels, and in doing so would create increase value to external customers and a supportive and informed internal market.

This article focuses on the internal market specifically rather than stakeholder markets generally and raises the issue of organisational fit such as functional ownership, accountability and responsibility. Where formal communication departments and functions existed, they tended to be dispersed across Human Resources, communications and sales offices without an identified board-level responsibility.

Prioritising markets is understandable given that different firms have different needs. However, meaningful board-level ownership and responsibility for these markets will eliminate the disconnect between organisations and their targeted markets, including internal markets. Marketing strategies are clearly vital if companies are to communicate values and products coherently and cohesively to external and internal markets.

A key recommendation for the organisational fit of internal marketing might be a project-based structure, which draws on the range of skills and competencies extant at the company for greater control and quality of coordination between departments.

The basic critical success factor for internal marketing is the competencies that are largely in place at most companies but not harnessed in any co-ordinated way. A skill and competency audit may form the basis for the fit through the proposed project office structure.

Synergy and changeA culture of anticipating and dealing with change is essential for the success of any organisation. Our research indicated a significant time lag arises between the communication of revised external marketing plans which results in resistance to organisational change when new marketing strategies are implemented. This was largely attributable to the timing of the communication and top down 'monologue style' communication deployed by companies.

Our research is clearly not unique in identifying an emerging issue, but the critical success factor still needs to be the viable and affordable implementation of the strategy. Once there is ownership at board level and responsibility for internal marketing is delegated to existing internal resources through a structured control system, synergy among internal and external strategies can be reached.

The key steps are as follows:Identify – the initial stage of implementation is used to identify the resources and competencies available and the project control function through which it is to be managed.

Segment – the next step is to segment the stakeholders' groups (internal markets) of the firm. The process of segmentation is important and should be dealt with using standard marketing approaches. Segmenting internal markets depends on the company's strategic marketing plan and the range of stakeholder groupings.

Profile – the third step is to analyse the segmented groups creating profiles for target segments based of the analysis of each of the segment's attitudes, behaviours and underpinning norms of the organisational culture. Clearly, communication across operational or foreign staff might be communicated through a different marketing mix as messages would be tailored to each target group profile.

Communications mix – marketing communication is the fourth step which includes integrated marketing communications as one of the 'marketing like' activities. Feedback and response mechanisms are an essential part of a robust design to create two-way messaging and communication. Developing dialogue between internal audiences and the company requires integrated marketing communication planning in order to allocate resources to the right audience segments.

Approach – approach is the next step: it tests communication strategies on a small sample (pilot study) before going live.

Protect – protection is the step which aims to create sustainable dialogue between the company and its internal markets. It is important that anonymity is preserved at all levels where negative feedback is received in order to maintain trust and enable relationship development with internal markets. Ethical issues and the company's value statement should be taken into account when implementing internal strategies in the same way as one would undertake an external strategy. The internal strategy mirrors that of external markets of which ethical standards form a vital component. The only difference is the target audience now includes the internal markets.

Measure – measurement is the step to review the whole process of implementation and manage the level of success achieved in carrying out the process. This step should set a mechanism through which this check can be done and determines how often this process should be repeated. The most common practices are the reviews, surveys and recall tests.

While these steps are self evident as adapted from standard marketing theory, our research showed universal acknowledgement that marketing techniques were not used in internal communication.

The trialogue: an iterative relationshipMarketing literature suggests that companies, regardless of their sectors or industries, should create a useful dialogue between the markets (both external and internal) which they can transform into quantifiable bottom line profits. A series of qualitative interviews yielded a wealth of data that was translated into a series of performance importance matrices that led to the development of the model.

Our research showed that many companies in the current climate lack such ability and, although most of the firms aspired to achieve a successful depth of customer relationships, most had little or no relationship marketing strategies in a business to business context, or for that matter, the broader range of markets. Most did not focus at all on their internal market.

The two main issues here are a basic need of focus on internal markets and the creation of beneficial dialogue with their internal and other markets.

Our research suggests a three-way communication process: • The company as an institution • Individuals within the company • External markets through a congruent communications mix.

This was translated into a model which we have termed the 5S marketing universe model shown above.

The 5S marketing universe model

5S marketing universe modelThe model is a legitimate part of the marketing planning process at board level. It is essential to mention that this model undertakes internal marketing programmes both as an output from external marketing programmes but also as an input. For example, the limitations and barriers in internal marketing programmes should be considered as a part of the marketing planning process at both strategic and tactical levels.

OutcomesThis research has highlighted a clear need to minimise the existing gap between the importance and performance of a broad swath of marketing concepts. It was acknowledged that most usual and practiced espoused strategy is externally focused with little attention given in a marketing context to the internal market.

Our research showed a disconnect and lack of understanding of company strategy across internal markets specifically.

Although companies acknowledged availability of in-house resources and competences through which to address the need for an appropriate organisational fit, it is suggested that synergy and competitive advantage may be achieved through the effective harnessing of existing strategic capabilities through an effective internal marketing strategy.

The AuthorsAbdur Razzaq is a visiting lecturer and Bruce Sheppy is associate professor at the European School of Economics, London.